Mortgage rates going up.

Rising bond yields have pushed TD to raise some medium and long term mortage rates with more increases forecast:

Soaring bond yields have set the stage for a second round of interest rate hikes on residential mortgages in about a week.

After nudging rates higher on longer-term mortgages last Wednesday, Toronto-Dominion Bank yesterday raised borrowing costs on its five-year, fixed-rate loan by 40 basis points to 5.85 per cent, effective today.

Last week, TD and the other banks increased rates on five-year, fixed-rate mortgages by 20 basis points to 5.45 per cent.

While no major competitor had followed TD’s move by late yesterday, experts suggested higher rates are likely inevitable because banks are facing higher borrowing costs on the bond market. Banks tap the bond market to finance mortgages because they lend out more money than they attract through deposits.

So here are some questions for discussion: Mortgage rates are near an all-time low, which means you can still borrow money cheaply and local house prices have dropped more than 10% from their peak.  So is now a good time to buy?  What happens to prices when mortgage rates go up?  Are you saving for a higher down payment in an higher interest rate environment or jumping in now, potentially paying more but with a lower interest rate on the debt?  What about buying in non-local markets that have fallen closer to 50% off from their peak?

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realpaul
realpaul
11 years ago

patriotz:

Very good point about the debt ratio being much higher in BC. If you ever run across the number I would be very interested to see it. You how difficult it is to real time information in this province.

afc
afc
11 years ago

Anonymous:

There may be lots of dumb financial planners since financial planning is not regulated and anyone can call himself a financial planner. But I would think in most cases it is the customer who is dumb. If you anyone goes to a lawyer, an accountant or even a plumber, he is expection to pay a hour rate. Nearly 100% people expecting to receive financial advice for free. Everyone has to make a living, right?

No Longer Looking
No Longer Looking
11 years ago

None of the units in the Coquitlam fire were pre-sold. I went to their site and there appears to have been an attempt to pre-sell them: http://www.springbankcorp.com/Projects.aspx?ID=7

The developer indicates that they will build again. Maybe, but probably at a much later date. If the Evergreen Line is stalled another decade, I have my doubts though.

News reference:

"The condo complex was called Evergreen, a venture that was scheduled to be completed in September, one of the developers told CBC News on Thursday.

None of the units had been presold, and the developers said they were insured and would mostly likely rebuild the complex."

http://www.cbc.ca/canada/british-columbia/story/2

patriotz
11 years ago

oneangryslav: “…The real debt of Canadians is at an all time high at 130% of disposable income…” realpaul, do you know if that figure includes mortgage debt? Yes. Remember there are a lot of people who have no non-mortgage debt at all. There is no way the rest could borrow enough to average out at 130% of income. What matters for mortgage debt, like any other capital debt (as opposed to consumer debt), is whether the capital asset yields enough income to cover the interest payments. If so, the asset/debt portfolio is actually making money for the borrower. Like the preferred shares that I bought in my margin account a few months ago. 🙂 However if not – like for RE in BC, where the rental value is far less than interest cost for any house bought during the bubble… Read more »

Anonymous
Anonymous
11 years ago

afc:Hey dumbass 320 there are 319 other financial planners have been found on blogs all of them looks like an idiots now.

afc
afc
11 years ago

Bob: Bob, I am a lender and a financial planner. I assume you need two income to serve your $500K mortgage. I don't know how many kids you have and what kind of life style you have. I have many clients with $500K mortgage with a rate around 4%. One couple with combined income of $130K now in trouble to handle their mortgage payments. Their PLC and visa is up to the limit. For myself, I have a combined income just over $160K, I would never borrow $500K. Lots of things could happen, one of you could lose his/her job. It could happen to anybody. My several co-workers just got laid off. Probably they never thought it could happen to them since a couple of them had been working for our institution for over 20 years. I agree with you,… Read more »

Just_Spiffy
Just_Spiffy
11 years ago

Depends where Bob's house is located. $1900 to $2100 is pretty much going rent right now for a whole house in the Langley area. $1400-1600 gets you a townhouse only or the top half of a house. Might be different in other areas of course. I've only been watching Langley for the past few months, so I don't know about different areas.

RennieWhereRU?
RennieWhereRU?
11 years ago

Bob. I wont raise obvious prior points in that you paid too much for the house to begin with. I think your being too agressive with rental equivalent of the house. I doubt your house would rent for $2,100 per month. Assuming the house you own (well the bank owns it until you pay that mortgage off) is worth $550,000, the rent should be around $1,500 to $,1750 tops in todays market. I figure the house we are in is worth $550,000 and we are paying $1,450 in rent. So not only in this artificial low interest rate environment (rates about to and are rocketing upwards) are your monthly mortgage payments higher than rent equivalent, you have to pay property taxes, insurance, utilities (sewer and water), R&M. I dont get the concept of long term home. I like the fact… Read more »

realpaul
realpaul
11 years ago

oneangryslav: #51 OAS, it's actually 138% but who's quibbling. The calculation is is the article "The conventional wisdom seems to be that the financial situation of Canadian households is generally sound and certainly much better than that of our profligate and heavily indebted American neighbours. The Bank of Canada argued in its end of 2008 Financial System Review that “(O)verall, despite a modest deterioration, the financial position of the Canadian household sector remains relatively positive.” ( p.21) The 2009 Budget displayed a re-assuring Chart showing US household wealth falling far more precipitously than in Canada. (Chart 2.5). And it is true that household debt as a percentage of after tax (disposable) income in 2008 was, at 138%" http://www.progressive-economics.ca/2009/06/03/in… "Yeehah, we're all gonna die" as Country Joe and the Fish sang. It's only money right and looky how shiny those counter… Read more »

Specuskeptic
Specuskeptic
11 years ago

”Dave Dosh

Satv

John

Browntown

Supraboy

Vancouverboom2”

Thanks for leaving us the rosetta stone of troll/jackasses.

Anonymous
Anonymous
11 years ago

Anonymous: D,s,j,b,s,v.also have few more names include username2010,laud speaker,first post etc.but so far on this thread.

Dave Dosh

Satv

John

Browntown

Supraboy

Vancouverboom2

Anonymous
Anonymous
11 years ago

thompson the troll mortgage broker is back.

he calls himself krissh and thumbsup and a bunch of other names. He thinks acting dumb and making dumb arguments might bring him more business.

Just_Spiffy
Just_Spiffy
11 years ago

I had some interesting bond conversations with people today and they pointed out the the US is having a heck of a time keeping bond yields where they want them. Apparently not much demand for the US 10 year bonds. So EVEN with the Government printing money and buying its own bonds to try to stabalize prices where they want them, they can't. That was encouraging to me anyway. Seems like the government can try to control them, but doesn't have complete control which is encouraging.

Thanks Crabman for the graph. I'm gonna have to try and puzzle over it a bit more later. Looks intruging though.

Just_Spiffy
Just_Spiffy
11 years ago

It would be so sweet if rates went waaaay up. I see the potential for them to. They've been so low for so long. It's been annoying really.

ursus
ursus
11 years ago

Hey luc (post #2),

I've got 100% down payment, and wating for rates to go WAYYY up, to bring prices WAYYY down.

oneangryslav
oneangryslav
11 years ago

realpaul:

"…The real debt of Canadians is at an all time high at 130% of disposable income…"

realpaul, do you know if that figure includes mortgage debt?

I just laugh when I hear the disparaging remarks about the profligacy of US residents from smug Canadians, and then point out to them that the our (Canada's) debt burden (per capita) is even more onerous than than it is in the US.

realpaul
realpaul
11 years ago

BOC Gov Marc Carney flip flops off holding intrest rates low. Gee Marc, are you finally having to acknowledge the raging food and energy price inflation? This is not, repeat not because of an improved outlook in the CDN economy. Food and energy prices have been ballooning worldwide because of competition for food products and materials, particularily from Asia. http://www.examiner.com/x-6012-State-of-the-World… BOC is going to have to stomp on the wet dreams of the real tards to keep a lid on spiralling price inflation here. He's painted himself into a corner though having dropped rates to zero to juice the spending of savings by offering negative real returns. I have long postulated the governments plan all along has been to get the savers to stop saving and crystallize their investments. This has created windfall tax revenue and juiced the economic numbers… Read more »

Crash
Crash
11 years ago

I see some local real estate agents have jumped on the latest supply/demand numbers. Two R/E agent sites I looked at have the same BCREA sourced graph illustrating a converging supply/demand trend. Ever the pumper optimists, one forcasts imminently rising prices (sure…) and that BC will soon become unafforable again (like we aren't now?) along with a few gems from Cam Muir with his usual litany of why sales are up and prices will increase (he always has different reasons; it's always entertaining if nothing else). With mortage rates increasing at an escalating pace, it should be an interesting summer and fall.

read on
read on
11 years ago

ok, too many retard trolls, too little real argument.

think I'll take a break from reading this blog for a few months

enjoy the summer everyone

Sold2Soon
Sold2Soon
11 years ago

….And so is some property in Coquitlam…going up in flames, that is! This makes for two or three in the last year, doesn't it?

Richard Stabile Berg
11 years ago

I am hoping that for the near term rates will now moderate. The heavy borrowing to cover all the programs and deficits by the U.S. is starving off capital. The yield curve has steepened. The only silver lining is the jumbos are not so bad. The spread from conforming is only about 5/8%. This is way better then the 4th quarter of 2008.

crabman
11 years ago

Just_Spiffy: Governments around the world are borrowing lots of money right now, which means they are issues lots of debt. During the economic crisis, there have been plenty of buyers for this debt. (China, OPEC, nervous investors, etc.)

As the economy improves, people move away from safe government bonds, which drives rates up. This is why we've recently seen stocks and commodities doing well, and bond rates rising. If this trend continues, there will be fewer buyers for an increasing amount of debt, which could drive rates much higher regardless of what the Fed or BOC do.

Check out this graph for the correlation between various rates recently.

Anonymous
Anonymous
11 years ago

Anonymous: In dispute to the on going sound owners own the place but tenants oh, ah,ouchhh,MUST LEAVE.

Just_Spiffy
Just_Spiffy
11 years ago

" crabman Says:

June 11th, 2009 at 8:58 am

Just_Spiffy: Mortgage rates are set by the bond market, which the BOC has no control of."

Yes I agree that mortgage rates are set by the bond market. However, doesn't the Government sometimes try to control Bond rates by messing with the money supply? Like what they are trying to do in the U.S. with printing money? I'm just musing with the thought that if so many Canadians are in debt up to their eyeballs, would the government of Cdn be forced to bail them out, by trying to control the bond rates. Sorta like what's happening in the US. Inflation helps those with debt and not us savers!

Anonymous
Anonymous
11 years ago

“If I am renting a house do I get less privacy than “owning” it?” "Yes if you live in basement,duplex,or one of the floor in a house for example one of my friend was having sex with his wife at the end owner speaks from behind the door”are you done” It’s very difficult to have sex with orgasim,difficult to adjust work schdules,Imagine you go to sleep but other occupants just entering back from work or parties,Imagine you are in a middle of your sleep and a guy upstair beating his wife.Imagine you have to start next day @ 6am but there are lots of overnight parties in a house you lived in.If you live in Condo still your owner or related people knew about you and your work place etc.If you are renting a place you might have to wonder… Read more »